The Blog

Is Now REALLY the Time to Buy Bitcoin?

By Miranda Marquit

The last few weeks have seen everyone thrown into a Bitcoin frenzy. With Bitcoin close to $20,000 as of this writing, it’s hard not to get swept up in the excitement.

But is now really the time to buy Bitcoin?

Bitcoin is a speculative commodity and as such we don’t recommend it – you’d be far better putting your efforts towards understanding and investing in more traditional outlets, like savings accounts or stock index funds. And of course, you should have plenty of cash in your emergency fund.

If you’ve done that and itching to have some Bitcoin with your spare cash – before you jump on the bandwagon, take a step back and figure out if it’s really the right move for you.

Could Bitcoin be in a Bubble?

One of the signs something is in a bubble is when the price seems to be going sky-high — with no signs of stopping.

Plus, ask yourself this question: Have you heard about Bitcoin from your coworkers or friends? Are these folks you usually talk about investing subjects?

When something seems everywhere, it’s usually a sign that things are reaching a peak. Sure, there’s a good chance Bitcoin will settle down and see some sustained growth. But there’s a pretty good chance that will happen after the current bubble bursts.

The reality is that Bitcoin is practically unaffordable for most regular folks right now, and there are questions about how much higher it can go from here. At some point, there is likely to be a correction. That might be the time to buy Bitcoin — after it drops to something a little more reasonable and affordable.

What About Other Cryptocurrencies?

Maybe you’re interested in buying Bitcoin, but you aren’t sure about paying so much for it. Yes, you can invest in fractions of a Bitcoin, but even if you only get 1/8 of a Bitcoin, you’re still paying more than $2,000 for it.

One of the effects of the current Bitcoin enthusiasm is that other cryptocurrencies are gaining value. Instead of going for Bitcoin, you might be able to benefit from an alternative crypto, like Ethereum, Litecoin, or Dash. Those currencies are more affordable, and they are seeing some interest and gains as well. In a way, it’s similar to buying silver when gold prices are higher than you’d like to pay.

However, no matter what you buy — whether it’s Bitcoin or some other cryptocurrency — you need to be careful. Does the asset fit into your portfolio? How will it help your overall financial goals? And, of course, can you afford to lose?

Cryptocurrencies are new enough that they can still be considered speculative investments. As a result, you could be looking at serious losses if you put too much in. Any money you use to invest in any cryptocurrency should be money you can lose without ruining your financial future.

Have You Thought About Blockchain Technology?

While it’s exciting to focus on Bitcoin, have you thought about the underlying technology?

Bitcoin is based on blockchain technology. This technology has potential beyond offering a way to send cryptocurrencies back and forth. Blockchain technology has a number of uses, including:

Payments processing for any currency, not just cryptocurrencies

Enforcement of contracts

Filling the place of escrow-related transactions

Supply chain management

Identification verification

Intellectual property ownership

Discount and promotion authentication

There are a number of companies experimenting with blockchain applications. If you are more interested in the underlying technology, you could invest in something other than just buying Bitcoin.

Of course, depending on the project or company, you could still be speculating. You need to be careful about how you invest so that you can avoid financial devastation in the event that you lose your money.

Because blockchain technology is so versatile, it offers you the chance to invest in the future without getting swept up in the Bitcoin craze of today.

Don’t Get Caught Up

There’s nothing wrong with deciding that it makes sense for you to buy Bitcoin. However, you need to know what you’re getting into.

Look at the merits of Bitcoin, and determine whether or not you think it’s overpriced — and whether you think it will actually keep gaining from this point.

Also, think about whether you think it will remain as it is for now. Bitcoin and cryptocurrencies are in their infancy. They could look very different in a few years. Your investments should have staying power, or at least help you accomplish some of your financial objectives.

Be honest about why you want to buy Bitcoin. If it’s because you hope to cash in on a trend, you could fail. However, if you think that it will be a solid investment in the future, and you can afford to be wrong, it might be worth waiting for a correction and then getting in when the price is a little more reasonable.